Posted by Ronald * Starr(in No CA) on August 10, 2003 at 15:07:40:
Linda Simms--------
I see now. If you assumed he was talking about single family properties, I agree with it. It seems very unlikely that a single family of that value would have a positive cash flow if financed in any sensible way.
I assumed he was talking about multiple properties or multi-family units.
Good InvestingRon Starr**
Income property - Posted by Alexander
Posted by Alexander on August 09, 2003 at 20:38:17:
Hello. I am looking to invest into an income property. I am looking to find one around $800K. I am open to any area of the country. I am not looking for the best area, perhaps working-class neighborhood. I am also looking for an area that has potential for appreciation.
Has anybody been successful in buying income properies out of state?
Can anybody share their thoughts on what area of the country they would consider good in terms of potential cash flow and appreciation potential.
I am looking for CAP of at least 10%.
I would really appreciate yout help.
Sincerely,
Alexander.
Re: Income property - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 10, 2003 at 10:15:23:
Alexander--------------
I am wondering if you can find both a 10 cap rate on income and a higher-than-average appreciation in the same location.
At first, when you talked about appreciation, I was going to suggest you invest in inland CA. I expect excellant appreciation here for some years to come. However, I really am doubtful about buying for a 10 cap rate here.
You see, there tends to be a trade off between expected appreciation and expected rental income rates. People in CA pay lower Cap rates for property because they anticipate good return from appreciation. People in many other parts of the country demand high cap rates since they anticipate low appreciation.
I also agree wiht Linda Simms about investing closer to home. If you are a beginner, starting with an $800K property sounds like a questionable idea. I’d recommend starting with less expensive property. That way, if you run into problems, they are likely to be be smaller ones. Hving to make the payments on a mortgage of an expensive property such as you mention could be very difficult from your other resourcesm should something go wrong, such as governmental agency requiring you to close it up.
Learn on smaller properties, where you have less at risk, it seems to me. Then, when you are more comfortable with your operation, you can expand to larger properties. You need to develop your procedures and forms: rental application, checking applicants, rental agreement, building rules, rent collection bookkeeping system, understanding of the tax laws related to income properites, etc.
I’d suggest that you refine your requirement down and do studies of several different locations that you think would interest you–but not the whole country. That is too unfocused, it seems to me. Lack of focus is a big drawback in real estate investing.
Good InvestingRon Starr***
Re: Income property - Posted by Arthur
Posted by Arthur on August 09, 2003 at 21:15:42:
Is there any reason why you do not want to invest in your own area? If your new to investing, stick to the areas you know, that you can get to or you could be ripped off by a management company or overpay. If you buy locally, you could manage yourself.
Re: Income property - Posted by Linda Simms
Posted by Linda Simms on August 10, 2003 at 08:33:35:
It is very unlikely that you will get any positive net income out of a property for which you pay $800,000. Rental income simply is unlikely to carry it. If you have some other way to make positive income on it, the more power to you! Unless you live in costal california or other states, I see very little reason to invest outside your own area and then simply go inland.
Your answer seems strange - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 10, 2003 at 10:03:51:
Linda Simms------------
Nice to meet you. I’ve noticed you sharing your knowledge recently.
Your answer of “It is very unlikely that you will get any positive net income out of a property for which you pay $800,000.” I don’t understand this. Is there something here that is mistyped? I would think that a property of that value could be bought with excellent cash flow.
Were you thinking that Athur said “no money down?” Even if so, I can imagine that in many parts of the country he could buy with no money down and get a positive casf flow.
I’m very puzzled by your comments. I’d like to hear more.
Good InvestingRon Starr******
Re: Your answer seems strange - Posted by LindaSimms
Posted by LindaSimms on August 10, 2003 at 14:44:34:
Dear Puzzled. Unless Alexander is talking about multi unit properties and I may have incorrectly assumed he was talking about SFH’s, unless you are going to put down a large amount, it is unlikely that the rent will be able to carry the debt load,on a $800,000 property hence no positive cash flow. Income producing, but not enough to carry the debt and having to take the risk of appreciation carrying the day. If you want positive income cash flow from rents, you have to get the income to exceed the outgo. I am just joking ofcourse, as I am well aware that you understand all of this. In my 25 plus years of investing it is my experience that it usually comes down to the basics.
Opps, error: Alexander, not Author. NT - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 10, 2003 at 10:05:15:
No Text
Re: Your answer seems strange - Posted by Paul Ness, MAI
Posted by Paul Ness, MAI on August 11, 2003 at 07:22:29:
Your comment linking an $800,000 transaction level to the inability to have favorable cash flow threw me as well. At that price I assumed he was talking about apartments or small commercial, and agree with your point about SFR’s - I don’t think anyone would buy an $800,000 SFR and consider it an income property.